- Published: 29 April 2009
- Written by Editor
DreamWorks Animation Reports First Quarter 2009 Financial Results
DreamWorks Animation SKG, Inc. (Nasdaq: DWA) today announced financial results for its first quarter ended March 31, 2009. In the quarter, the Company reported total revenue of $263.5 million and net income of $62.3 million, or $0.71 per share on a fully diluted basis. This compares to revenue of $157.2 million and net income of $26.1 million, or $0.28 per share on a fully diluted basis, for the same period in 2008.
"This marks the Company's strongest first quarter ever, attributable primarily to the blockbuster performance of Madagascar: Escape 2 Africa, both at the international box office and in the domestic home video market," said Jeffrey Katzenberg, CEO of DreamWorks Animation. "Adding to our recent theatrical achievements, Monsters vs. Aliens is the highest-grossing film of the year to date and DreamWorks Animation's third consecutive domestic blockbuster in 10 months."
For the quarter, Madagascar: Escape 2 Africa contributed $147.5 million of revenue, driven by international box office and its release into the domestic home entertainment market. The film has now reached approximately $595 million in worldwide box office and an estimated 6.7 million home entertainment units sold worldwide, net of actual and estimated future returns.
"Having two of the top home video releases in back-to-back quarters demonstrates the continued strength of our product in the home entertainment market," stated Ann Daly, Chief Operating Officer of DreamWorks Animation. "Just as it does in theaters, family content - and CG animated hits in particular - continues to outperform the industry as a whole."
Kung Fu Panda, DreamWorks Animation's most successful original film ever, contributed approximately $34.1 million of revenue during the first quarter of 2009, primarily from international home entertainment. Through the end of the first quarter, Kung Fu Panda reached an estimated 14.3 million home entertainment units sold worldwide, net of actual and estimated future returns.
The Company's 2007 and 2006 fall releases, Bee Movie and Flushed Away, delivered $21.2 million and $12.2 million of revenue to the quarter, respectively. The former was driven by international pay television and the latter by worldwide free television. Through the end of the first quarter, Bee Movie reached an estimated 9.1 million home entertainment units sold worldwide, net of actual and estimated future returns.
Monsters vs. Aliens, the Company's 2009 release, contributed $10.5 million of revenue during the first quarter of 2009, primarily from consumer products. The film was released domestically on March 27th and has now reached approximately $320 million in worldwide box office.
The Company's 2006 and 2007 summer releases, Over the Hedge and Shrek the Third, delivered $8.8 million and $5.3 million of revenue to the quarter, respectively. Both titles were driven primarily by international free television. Library and other revenue contributed $23.9 million of revenue to the quarter, including $9.8 million from Shrek The Musical.
Costs of revenue for the quarter equaled $156.4 million. Selling, general and administrative expenses totaled $20.7 million (including approximately $5.9 million of stock compensation expense) as compared to $26.7 million (including approximately $9.7 million of stock compensation expense) for the comparable period of 2008.
Results for the quarter also included a tax benefit of approximately $18.8 million related to the Company's tax sharing agreement with a former stockholder, which resulted in a lower effective tax rate. This benefit was partially offset by a $16.0 million increase in cost for the income tax benefit payable to the former stockholder (as shown on the consolidated statement of income before the line item, "income before income taxes"), resulting in an overall net increase to net income of $2.8 million, or an estimated $0.03 per share on a fully diluted basis.
The Company also provided an update to its share repurchase program. Year to date, it has purchased $46 million, or 2.3 million shares, at an average price of approximately $20.20. Finally, the Company announced that its Board of Directors has authorized future share repurchases of up to $150 million. These repurchases may be made in the open market, in block trades or in privately negotiated transactions.
Items related to the earnings press release for the first quarter of 2009 will be discussed in more detail on the Company's first quarter 2009 earnings conference call later today.
Conference Call Information
DreamWorks Animation will host a conference call and webcast to discuss the results on Tuesday, April 28, 2009, at 4:30 p.m. (ET). Investors can access the call by dialing (800) 230-1059 in the U.S. and (612) 332-0107 internationally and identifying "DreamWorks Animation Earnings" to the operator. The call will also be available via live webcast at www.dreamworksanimation.com.
A replay of the conference call will be available shortly after the call ends on Tuesday, April 28, 2009. To access the replay, dial (800) 475-6701 in the U.S. and (320) 365-3844 internationally and enter 993846 as the conference ID number. Both the earnings release and archived webcast will be available on the Company's website at www.dreamworksanimation.com.
About DreamWorks Animation
DreamWorks Animation is principally devoted to developing and producing computer generated, or CG, animated feature films. With world-class creative talent, a strong and experienced management team and advanced CG filmmaking technology and techniques, DreamWorks Animation makes high quality CG animated films meant for a broad movie-going audience. The Company anticipates releasing its feature films into both conventional and IMAX® theatres worldwide. The Company has theatrically released a total of eighteen animated feature films, including Shrek, Shrek 2, Shark Tale, Madagascar, Over the Hedge, Shrek the Third, Bee Movie, Kung Fu Panda, Madagascar: Escape 2 Africa and Monsters vs. Aliens. All of the Company's feature films are now being produced in stereoscopic 3D technology.
Caution Concerning Forward-Looking Statements
This document includes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The Company's plans, prospects, strategies, proposals and our beliefs and expectations concerning performance of our current and future releases and anticipated talent, directors and storyline for our upcoming films and other projects, constitute forward-looking statements. These statements are based on current expectations, estimates, forecasts and projections about the industry in which we operate and management's beliefs and assumptions. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions which are difficult to predict. Actual results may vary materially from those expressed or implied by the statements herein due to changes in economic, business, competitive, technological and/or regulatory factors, and other risks and uncertainties affecting the operation of the business of DreamWorks Animation SKG, Inc. These risks and uncertainties include: audience acceptance of our films, our dependence on the success of a limited number of releases each year, the increasing cost of producing and marketing feature films, piracy of motion pictures, the effect of rapid technological change or alternative forms of entertainment and our need to protect our proprietary technology and enhance or develop new technology. In addition, due to the uncertainties and risks involved in the development and production of animated feature projects, the release dates for the projects described in this document may be delayed. For a further list and description of such risks and uncertainties, see the reports filed by us with the Securities and Exchange Commission, including our most recent annual report on Form 10-K and our most recent quarterly reports on Form 10-Q. DreamWorks Animation is under no obligation to, and expressly disclaims any obligation to, update or alter its forward-looking statements, whether as a result of new information, future events, changes in assumptions or otherwise.
** FINANCIAL TABLES ATTACHED**
UNAUDITED CONSOLIDATED BALANCE SHEETS
March 31, December 31,
2009 2008
---- ----
(in thousands, except par value
and share amounts)
Assets
Cash and cash equivalents $260,630 $262,644
Trade accounts receivable, net
of allowance for doubtful accounts 4,998 4,550
Income taxes receivable 11,490 6,468
Receivable from Paramount, net of
reserve for returns and allowance
for doubtful accounts 233,284 186,522
Film costs, net 609,894 638,243
Prepaid expenses and other assets 41,113 31,453
Property, plant and equipment, net
of accumulated depreciation
and amortization 121,802 114,913
Deferred taxes, net 13,501 27,049
Goodwill 34,216 34,216
------ ------
Total assets $1,330,928 $1,306,058
========== ==========
Liabilities and Equity
Liabilities:
Accounts payable $1,162 $7,499
Accrued liabilities 91,894 115,158
Payable to former
stockholder 44,506 54,192
Deferred revenue and other
advances 64,022 38,857
Borrowings and other debt 70,059 70,059
------ ------
Total liabilities 271,643 285,765
Commitments and contingencies
Equity:
Stockholders' equity:
Class A common stock, par
value $.01 per share,
350,000,000 shares
authorized, 95,392,465 and
95,381,143 shares issued,
as of March 31, 2009 and
December 31, 2008,
respectively 954 954
Class B common stock, par
value $.01 per share,
150,000,000 shares
authorized, 11,419,461
shares issued and
outstanding, as of
March 31, 2009 and
December 31, 2008 114 114
Additional paid-in capital 884,627 876,651
Retained earnings 707,571 645,261
Less: Class A Treasury
common stock, at cost,
19,184,505 and 17,432,728
shares, as of March 31,
2009 and December 31,
2008, respectively (536,922) (505,628)
-------- --------
Total stockholders' equity 1,056,344 1,017,352
Minority interest 2,941 2,941
----- -----
Total equity 1,059,285 1,020,293
--------- ---------
Total liabilities and
equity $1,330,928 $1,306,058
========== ==========
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
Three Months
Ended
March 31,
-----------
2009 2008
---- ----
(in thousands, except per
share amounts)
Revenues $263,524 $157,172
Costs of revenues 156,406 96,491
------- ------
Gross profit 107,118 60,681
Product development 2,368 -
Selling, general and administrative expenses 20,691 26,722
------ ------
Operating income 84,059 33,959
Interest income, net 539 2,983
Other income, net 1,452 777
Increase in income tax benefit payable to
former stockholder (16,010) (9,430)
------- ------
Income before income taxes 70,040 28,289
Provision for income taxes 7,730 2,190
----- -----
Net income $62,310 $26,099
======= =======
Basic net income per share $0.71 $0.28
----- -----
Diluted net income per share $0.71 $0.28
----- -----
Shares used in computing net income per share
Basic 87,465 92,314
Diluted 88,102 92,416
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months
Ended
March 31,
-----------
2009 2008
---- ----
(in thousands)
Operating activities
Net income $62,310 $26,099
Adjustments to reconcile net income to net
cash provided by operating activities:
Amortization and write off of film costs 135,237 92,511
Stock compensation expense 5,854 9,695
Depreciation and amortization 726 582
Revenue earned against deferred revenue and
other advances (10,831) (2,552)
Deferred taxes, net 13,548 2,644
Change in operating assets and
liabilities:
Trade accounts receivable (448) (12,092)
Receivable from Paramount (46,762) 117,018
Film costs (101,657) (97,404)
Prepaid expenses and other assets (9,664) 10,499
Accounts payable and accrued liabilities (29,431) (33,397)
Payable to former stockholder (9,686) (24,316)
Income taxes payable/receivable, net (5,022) (20,324)
Deferred revenue and other advances 38,496 38,473
------ ------
Net cash provided by operating activities 42,670 107,436
Investing activities
Purchases of property, plant and equipment (13,411) (6,775)
------- ------
Net cash used in investing activities (13,411) (6,775)
Financing Activities
Receipts from exercise of stock options 21 120
Excess tax benefits from employee
equity awards - 6
Purchase of treasury stock (31,294) (83,837)
------- -------
Net cash used in financing activities (31,273) (83,711)
------- -------
Increase\(Decrease) in cash and cash
equivalents (2,014) 16,950
Cash and cash equivalents at
beginning of period 262,644 292,489
------- -------
Cash and cash equivalents at end of period $260,630 $309,439
======== ========
Supplemental disclosure of cash flow
information:
Cash paid/(received) during the period for
income taxes, net $(878) $19,864
===== =======
Cash paid during the period for
interest, net of amounts capitalized $218 $342
==== ====
